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The F-35 Lightning II, also known as the Joint Strike Fighter (JSF), is the Department of Defense's (DOD) most costly and ambitious aircraft acquisition, seeking to simultaneously develop and field three aircraft variants for the Air Force, Navy, Marine Corps, and eight international partners. The JSF is critical for recapitalizing tactical air forces and will require a long-term commitment to very large annual funding outlays. The current estimated investment is $382 billion to develop and procure 2,457 aircraft. This report, prepared in response to a congressional mandate in the National Defense Authorization Act for Fiscal Year 2010, discusses (1) program cost and schedule changes and their implications on affordability; (2) progress made during 2010; (3) design and manufacturing maturity; and (4) test plans and progress. GAO's work included analyses of a wide range of program documents and interviews with defense and contractor officials.

DOD continues to substantially restructure the JSF program, taking positive actions that should lead to more achievable and predictable outcomes. Restructuring has consequences--higher up-front development costs, fewer aircraft in the near term, training delays, and extended times for testing and delivering capabilities to warfighters. Total development funding is now $56.4 billion to complete in 2018, a 26 percent increase in cost and a 5-year slip in schedule compared to the current baseline. DOD also reduced procurement quantities by 246 aircraft through 2016, but has not calculated the net effects of restructuring on total procurement costs nor approved a new baseline. Affordability for the U.S. and partners is challenged by a near doubling in average unit prices since program start and higher estimated life-cycle costs. Going forward, the JSF requires unprecedented funding levels in a period of more austere defense budgets. The program had mixed success in 2010, achieving 6 of 12 major goals it established and making varying degrees of progress on the others. Successes included the first flight of the carrier variant, award of a fixed-price aircraft procurement contract, and an accelerated pace in development flight tests that accomplished three times as many flights in 2010 as the previous 3 years combined. However, the program did not deliver as many aircraft to test and training sites as planned and made only a partial release of software capabilities. The short take off and landing variant (STOVL) experienced significant technical problems and did not meet flight test expectations. The Secretary of Defense directed a 2-year period to evaluate and engineer STOVL solutions. After more than 9 years in development and 4 in production, the JSF program has not fully demonstrated that the aircraft design is stable, manufacturing processes are mature, and the system is reliable. Engineering drawings are still being released to the manufacturing floor and design changes continue at higher rates than desired. More changes are expected as testing accelerates. Test and production aircraft cost more and are taking longer to deliver than expected. Manufacturers are improving operations and implemented 8 of 20 recommendations from an expert panel, but have not yet demonstrated a capacity to efficiently produce at higher production rates. Substantial improvements in factory throughput and the global supply chain are needed. Development testing is still early in demonstrating that aircraft will work as intended and meet warfighter requirements. Only about 4 percent of JSF capabilities have been completely verified by flight tests, lab results, or both. Only 3 of the extensive network of 32 ground test labs and simulation models are fully accredited to ensure the fidelity of results. Software development--essential for achieving about 80 percent of the JSF functionality--is significantly behind schedule as it enters its most challenging phase. To sustain a focus on accountability and facilitate tradeoffs within the JSF program, GAO recommends that DOD (1) maintain annual funding levels at current budgeted amounts; (2) establish criteria for evaluating the STOVL's progress and make independent reviews, allowing each variant to proceed at its own pace; and (3) conduct an independent review of the software development and lab accreditation processes. DOD concurred.

Recommendations for Executive Action

Status: Closed - Implemented

Comments: The program established its new acquisition program baseline in March 2012. The program has largely managed cost overruns by reducing planned procurement funds. This has resulted in an overall reduction to the FY12-FY16 future years defense plan forecast contained in the FY14 budget submission in comparison to the FY12 budget submission, which was in place at the time of report issue.

Recommendation: Given the other priorities that DOD must address in a finite budget, a renewed and sustained focus on affordability by contractors and the Government is critical for successfully moving the program forward. DOD must plan ahead for a way to address and manage JSF challenges and risks in the future. To facilitiate making tradeoff decisions with respect to the JSF program that limit impacts to other DOD programs and priorities and to improve key management processes, the Secretary of Defense should do the following to reinforce and strenghthen program cost controls and oversight. The JSF program should maintain total annual funding levels for development and procurement at the current budgeted amounts in the fiscal year 2012-2016 future years defense plan (modified, if warranted, by the new acquisition program baseline expected this year). It should facilitate trades among cost, schedule, requirements, and quantities to control cost growth. Having gone through the Technical Baseline Review (TBR) and budget approval process, it is reasonable to expect the program to execute against the future years defense plan going forward. Only in instances of major and unforseen circumstances, should the Department consider spending more money on the program. Even then, we would expect changes to be few and adopted only after close scrutiny by defense leadership. Approved changes should be well supported, adequately documented, and reported to the congressional defense committees.

Agency Affected: Department of Defense

Status: Closed - Not Implemented

Comments: In January 2012, the new Secretary of Defense lifted the STOVL probation after 1 year, citing improved performance and completion of initial sea trials as a basis for the decision. In its report to Congress, the Department explained that STOVL progress was continually monitored throughout the probation period with specific exit criteria. The report also stated that the Commandant of the Marine Corps completed monthly reviews of STOVL progress in additional to the monthly Service Acquisition Executive reviews of the program.

Recommendation: Given the other priorities that DOD must address in a finite budget, a renewed and sustained focus on affordability by contractors and the Government is critical for successfully moving the JSF program forward. DOD must plan ahead for a way to address and manage JSF challenges and risks in the future. To facilitate making tradeoff decisions with respect to the JSF program that limit impacts to other DOD programs and priorities and to improve key management processes, the Secretary of Defense should do the following to reinforce and strengthen program cost controls and oversight. The Secretary of Defense should establish criteria for the STOVL probation period and take additional steps to sustain individual attention on STOVL-specific issues, including independent F-35B/STOVL Progress Reviews with Senior Leadership to ensure cost and schedule milestones are achieved to deliver required warfighter capabilities. The intent is to allow each JSF variant to proceed and demonstrate success at its own pace and could result in separate full-rate production decisions.

Agency Affected: Department of Defense

Status: Closed - Implemented

Comments: Our report recommended that the Department conduct an independent review of the contractor's software development, integration, and test processes -- similar to its review manufacturing operations -- and look for opportunities to streamline software efforts. We suggested that this review include an evaluation of the ground lab and simulation model accreditation process to ensure that it is properly structured and robustly resourced to support software test and verification requirements. DOD concurred with our recommendation and the initial independent software assessment began in September 2011 and ongoing reviews are planned through 2012.

Recommendation: Given the other priorities that DOD must address in a finite budget, a renewed and sustained focus on affordability by contractors and the Government is critical for successfully moving the JSF program forward. DOD must plan ahead for a way to address and manage JSF challenges and risks in the future. To facilitate making tradeoff decisions with respect to the JSF program that limit impacts to other DOD programs and priorities and to improve key management processes, the Secretary of Defense should do the following to reinforce and strengthen program cost controls and oversight. The Department should conduct an independent review of the contractor's software development, integration, and test processes--similar to its review of manufacturing operations--and look for opportunities to streamline software efforts. This review should include an evaluation of the ground lab and simulation model accreditation process to ensure it is properly structured and robustly resourced to support software test and verification requirements.